Botsman v Bolitho (No 2)

[2018] VSCA 348

SUPREME COURT OF VICTORIA

COURT OF APPEAL

S APCI 2018 0037

WENDY DIANNE BOTSMAN	Appellant
v
LAURENCE JOHN BOLITHO (and others according to the attached Schedule) (No 2)	Respondents

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JUDGES:	TATE, WHELAN and NIALL JJA
WHERE HELD:	MELBOURNE
DATE OF HEARING:	On the papers
DATE OF JUDGMENT:	17 December 2018
MEDIUM NEUTRAL CITATION:	[2018] VSCA 348
JUDGMENT APPEALED FROM:	[2018] VSC 47 (Croft J)

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COSTS – Costs of appeal – Group proceeding – Appellant is group member and first respondent is representative plaintiff in group proceeding – Where appellant achieved substantial success – Whether first respondent was proper party – Whether appellant’s costs should be paid out of settlement sum – Supreme Court Act 1986 s 33ZC.

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APPEARANCES:	Counsel	Solicitors
No appearances

TATE JA
WHELAN JA

NIALL JA:

1. On 1 November 2018, the Court granted leave and allowed the appeal against aspects of the approval of a proposed settlement. The Court made orders remitting certain matters to a judge in the Trial Division.[1] These reasons deal with the question of costs of the application for leave to appeal and of the appeal.

   [1][2018] VSCA 278 (‘Reasons’). This judgment on costs assumes familiarity with the Reasons allowing the appeal.

1. For the reasons that follow, we are of the view that the appellant’s costs should be paid by the first and third respondents, with the first respondent to pay 80 per cent of the costs and the third respondent to pay 20 per cent.

The parties’ submissions

1. The first respondent, Mr Bolitho, submits that he should not be held liable for the appellant’s costs. In the alternative, he submits that, if an order for costs is made in favour of the appellant, the Court should order that those costs be paid from the settlement sum under s 33V(2) of the Supreme Court Act 1986 (‘the Act’).[2]

   [2]Section 33V(2) provides: ‘If the Court gives such approval [of a settlement of a group proceeding], it may make such orders as it thinks fit with respect to the distribution of any money, including interest, paid under a settlement or paid into court.’

1. Mr Bolitho contends that, because this Court found that the appellant did not bring the appeal in a representative capacity,[3] the appeal was, or ought to be treated as, one relating only to a claim of an individual group member. Section 33ZC(4) of the Act provides that the parties to such an appeal are the individual group member and the defendant. It is submitted that a representative plaintiff such as Mr Bolitho would not ordinarily be a party to such an appeal and, for that reason, he cannot be liable for the appellant’s costs.

   [3]Reasons [191].

1. Mr Bolitho contends that, in any event, costs should not follow the event. He submits that, had the appeal failed, the appellant would not in all likelihood have been liable for costs. In that regard, he refers to s 33ZD(b) of the Act which provides that, with some limited exceptions, the Court may not order a group member to pay costs in a group proceeding. Mr Bolitho notes that the appellant’s counsel had suggested at an interlocutory hearing that, if the appellant were unsuccessful, Mr Bolitho’s costs could be paid from the settlement sum. It is submitted that there is no sound policy reason why a representative plaintiff seeking to maintain orders approving a settlement which benefitted group members should be in a different position to the appellant and be subject to an order for costs.

1. Mr Bolitho further submits that it would be appropriate for the appellant’s costs to be paid out of the settlement sum in circumstances where she played the role of the contradictor who ought to have been appointed at first instance.  In that regard, Mr Bolitho notes that the appellant raised a wide range of issues on the appeal, extending to questions of procedural fairness, the underlying causes of action and the quantum of the settlement sum. 

1. A further basis on which it is said that costs should not follow the event relates to the manner in which the Court disposed of the appeal.  Mr Bolitho contends that the appellant’s success on amended grounds 1, 2 and 5 is tempered by her failure on a number of other grounds.  Specifically, it is noted that the appellant failed on grounds 3 and 4 and was refused leave to add grounds 6 to 9, and to adduce fresh evidence.  He emphasises that the settlement sum was maintained and that this is significant in assessing the challenge to the appeal. 

1. Finally, Mr Bolitho notes that it would be incongruous if he were to be treated differently to the second respondent, the special purpose receiver (‘SPR’), who were also a party to the settlement and sought on the appeal to uphold its terms.

1. The appellant seeks an order that her costs of the application for leave and the appeal be paid by Mr Bolitho as to 80 per cent and by the third respondent, The Trust Company (Nominees) Ltd (‘Trust Co’), as to 20 per cent. 

1. The appellant contends that Mr Bolitho vigorously opposed all of the grounds of appeal and aligned himself with the position of the litigation funder, in circumstances where the funder was the principal beneficiary of the commission and the reimbursement of legal costs. It was those aspects of the approval which were overturned on appeal.  She submits that the errors identified on the appeal were significantly contributed to by Mr Bolitho in that his counsel opposed the appointment of a contradictor to the settlement approval applications, argued before the primary judge that the approval was straightforward, and advocated in favour of the payments to the funder on account of its commission and costs.

1. The appellant submits that this is not an appeal where it is appropriate to order costs on an issues basis.  The grounds on which she failed were properly raised and did not occupy a significant amount of time at the hearing. It was not one of those cases where the issues were clearly severable.

1. Trust Co submits that it should not be liable for any portion of the appellant’s costs in circumstances where it had successfully resisted the grounds of appeal that directly concerned it and was only peripherally engaged in the other issues.  The appellant, by grounds 3 and 4, had sought to overturn the settlement sum.  This Court rejected those grounds and upheld the primary judge’s assessment that the settlement sum represented a fair and reasonable compromise of the claims.  Trust Co’s oral submissions were confined to grounds 3 and 4 and, it submits, occupied only a very brief portion of the overall hearing of the substantive appeal.  Trust Co acknowledges that it made limited written submissions in relation to grounds 1, 2 and 5, but contends that those written submissions do not provide a basis on which it should be held liable to pay any of the appellant’s costs. 

1. Trust Co submits that, in the event that the Court was minded to order it to pay some portion of the appellant’s costs, it should only be liable for a small proportion relative to the other respondents who made detailed submissions resisting many of the grounds of appeal.

1. The SPR submit that there should be no order for costs in their favour or against them.  They contend that there were material differences between their conduct on the appeal and that of Mr Bolitho.  They also contend that their conduct before the primary judge differed from that of Mr Bolitho, primarily because they did not oppose the appointment of a contradictor and drew the judge’s attention to counter-arguments against the settlement approval. 

1. The SPR reject Mr Bolitho’s submission that costs should be paid out of the settlement sum on the grounds that this course derives no support from the settlement deed and would, in effect, penalise debenture holders.

Decision

1. The approach contended for by the appellant should be accepted.

1. Contrary to the submissions of Mr Bolitho, there is ample power in the Court to order costs and pt 4A of the Act does not relevantly circumscribe that power. The power to award costs is discretionary. The usual rule is that costs follow the event, and departure from that rule is only warranted in special circumstances.

1. The appellant sought to overturn the orders approving the settlement and, in doing so, concentrated on three aspects of the settlement approval: the quantum of the settlement sum, the funder’s commission and the reimbursement of legal costs.  She achieved substantial success, and the fact that she did not succeed in overturning the settlement sum does not justify a departure from the usual rule.  Further, given the interrelationship between each of the grounds advanced by the appellant, this is not a case where it is appropriate to determine costs on an issues basis.

1. Mr Bolitho comprehensively and vigorously opposed each aspect of the appeal.  Along with resisting each of the substantive grounds, he raised a number of preliminary issues that functioned as hurdles for the appellant to overcome, including in relation to the competency of the appeal, standing, and the need for security for costs.  The appellant has enjoyed substantial success on the appeal, particularly when regard is had to all those matters.

1. We do not accept Mr Bolitho’s submission that he should bear no liability for costs because he was not a proper party to the appeal. Mr Bolitho submitted on the appeal that s 33ZC of the Act was not available to the appellant but that, as a person affected by the order, she was entitled to utilise the general right of appeal, subject to the Court granting leave and the applicable time limit. It was never suggested that it was an application for leave to appeal that involved the determination of a question relating only to the claim of an individual group member.[4] 

   [4]See Supreme Court Act 1986 s 33ZC(4).

1. The weight of Mr Bolitho’s submissions was that s 33ZC was not engaged at all, but he agreed that the appellant had a right of appeal in the usual way (that is, pursuant to s 14B of the Act). This was accepted by the Court, which concluded that it was ‘not persuaded that [the appellant] brings the proceeding in a representative capacity or that she can rely on s 33ZC.’[5]  The Court granted the appellant an extension of time to bring her application for leave to appeal.  Dimitrov v Supreme Court of Victoria[6] does not stand for the proposition that s 33ZC provides a code comprising two mutually exclusive, but exhaustive, means by which an appeal might be brought. Mr Bolitho was a proper party to the proceeding brought by the appellant and, significantly, he took a leading role in resisting the appeal. Indeed, he took the leading role in resisting the appeal.

   [5]Reasons [191] (emphasis added).

   [6](2017) 92 ALJR 12.

1. Trust Co actively participated in the appeal and made written submissions in relation to grounds upon which the appellant ultimately succeeded. Although it should be recognised that Trust Co achieved success on the grounds that principally concerned it, and confined its oral submissions to those grounds, its position is fairly addressed by reducing its liability for costs in the manner proposed by the appellant.

1. We accept the submission of the SPR that their conduct before the primary judge and on the appeal may be relevantly distinguished from that of Mr Bolitho and, we would add, that of Trust Co.  In our view, no order as to costs should be made in respect of the SPR.

1. Having regard to the positions adopted by each of Mr Bolitho and Trust Co and their conduct on the appeal, it is appropriate that 80 per cent of the appellant’s costs be paid by Mr Bolitho and 20 per cent by Trust Co.  

1. We would not, at this time, accede to Mr Bolitho’s application that any costs ordered against him be paid out of the settlement sum. In substance he seeks to defray those costs by a payment out of the settlement sum under s 33V(2) of the Act. As presently advised, we do not currently have knowledge of all of the facts relevant to an exercise of the power under s 33V(2) including, for example, the extent to which Mr Bolitho has an indemnity from the funder in relation to costs of the appeal (including any costs that he might be ordered to pay arising from the appeal).

1. That said, it is our understanding that Mr Bolitho defended the appeal in a representative capacity. If he were obliged to meet the costs order out of his own funds, that might work an injustice.  If we are incorrect in our understanding, we would not preclude him from seeking a further order from this Court in relation to the recoupment of costs.  To that end, we shall reserve liberty to apply.  There may also be a need for further clarification of the capacity in which submissions were made on his behalf on the appeal.

1. Of course, it would remain open to him, or in the event he is indemnified by the funder, the funder, to seek an order for a payment from the settlement sum for the recovery of the costs of the appeal under s 33V(2).The outcome of such application would be a matter for the judge hearing the matter.

1. For those reasons, we shall order that the appellant’s costs of the application for leave and the appeal be paid by Mr Bolitho as to 80 per cent and Trust Co as to 20 per cent.  There shall be liberty granted to Mr Bolitho to apply.

SCHEDULE OF PARTIES

WENDY DIANNE BOTSMAN  Appellant

and

LAURENCE JOHN BOLITHO  First Respondent

BANKSIA SECURITIES LIMITED (ACN 004 736 458)              Second Respondent

THE TRUST COMPANY (NOMINEES) LIMITED (ACN 000 154 441)          Third Respondent

RSD CHARTERED ACCOUNTANTS (ABN 60 616 244 309)  Fourth Respondent

(formerly known as RICHMOND SINNOTT and DELAHUNTY)

PATRICK JOHN GODFREY  Fifth Respondent

NICHOLAS LIVINGSTONE CARR  Sixth Respondent

PETER WILLIAM KEATING  Seventh Respondent

GEOFFREY GRENVILLE SKEWES  Eighth Respondent

GEOFFREY S A LIPSHUT  Ninth Respondent

MAXWELL BROWN & MOUNTJOY (A PARTNERSHIP)  Tenth Respondent

LANTERN LEGAL GROUP PTY LIMITED   Eleventh Respondent

T/A HARWOOD ANDREWS      

INSURANCE HOUSE PTY LTD (ACN 006 500 072)  Twelfth Respondent

THE CHANNEL SYNDICATE 2015  Thirteenth Respondent

THE AMTRUST SYNDICATE 1206  Fourteenth Respondent

CHAUCER SYNDICATES LIMITED  Fifteenth Respondent

JOHN ROSS LINDHOLM AND PETER DAMIEN McCLUSKEY IN             Sixteenth Respondent

THEIR CAPACITY AS JOINT AND SEVERAL SPECIAL PURPOSE

RECEIVERS OF BANKSIA SECURITIES LIMITED (RECEIVERS

AND MANAGERS APPOINTED) (IN LIQUIDATION) (ACN 004 736

458)

BANKSIA SECURITIES LIMITED (RECEIVERS AND MANAGERS Seventeenth Respondent

APPOINTED) (IN LIQUIDATION) (ACN 004 736 458)

AUSTRALIAN FUNDING PARTNERS LIMITED (ACN 167 628 527)           Eighteenth Respondent